11.Failure to comply
with a provision of the Act or any Regulation, Order, Direction, Guideline
& etc. made or issued thereunder.

12.Investigations and
Inquiries to be concluded within six months.

13.Board of Inquiry.

14.Liability of bodies
corporate or unincorporated.

15.Recovery of sums due
to Government.

16.Provisions relating
to permission, consent or authority.

17.Burden of proof of
permission.

18.Presumption relating
to foreign currency.

19.Admissibility of
certain documents.

20.Indemnity for acts
done in good faith.

21.Duty of officers and
servants to maintain secrecy.

22.Preservation of
financial stability.

23.Expenses in suit or
prosecution to be paid out of the Consolidated Fund.

24.Contracts.

25.Obligations under
other written laws.

26.Penalties.

27.Amendment of
Schedules by Resolution of Parliament.

28.Publication of
Orders in daily newspapers.

29.Regulations.

30.Repeal and savings.

31.Currency, securities
etc.

32.Sinhala text to
prevail in case of inconsistency.

33.Interpretation.

SCHEDULE

12 of 2017.

AN ACT to provide for the promotion and
regulation of foreign exchange; to vest the responsibility for promoting and
regulating foreign exchange in the Central Bank as the agent of the Government;
to provide for the repeal of the Exchange Control Act; and to provide for
matters connected therewith or incidental thereto.

[Date of Commencement: Not
yet in force]

1. Short title and date of operation.

This Act may be cited as the Foreign Exchange Act and shall come
into operation on such date as the Minister may by Order published in the Gazette appoint (hereinafter referred to as “the appointed
date”).

2. Central Bank to be responsible for implementation of the
Act.

(1) The Central Bank shall as the agent of the Government, be
responsible for implementing the provisions of this Act in order to ensure
proper promotion and regulation of foreign exchange in Sri Lanka, in accordance
with such directions as may from time to time be issued in that behalf under
this section.

(2) The Minister assigned the subject of the Central Bank may,
from time to time, issue such directions as may be necessary for the
implementation of the provisions of this Act and it shall be the duty of the
Monetary Board to cause such directions to be carried out.

3. Discharge of powers, duties and functions by the Central
Bank.

Where under any provision of this Act any power, duty or function
is authorised or required to be exercised, performed or discharged by the
Central Bank, such power, duty or function may be exercised, performed or
discharged by the officer designated as the head of the Department of Foreign
Exchange or on his behalf any other officer designated as an assistant to him,
subject to the direction and control of the Governor of the Central Bank.

4. Authorised dealers and restricted dealers.

(1) —

(a)Every
licensed commercial bank shall, immediately upon such bank being issued a
license to carry on banking business under the Banking Act, be authorised by
the Central Bank to act, subject to the provisions of section 9 as an
authorised dealer to deal in foreign exchange.

(b)Every
licensed commercial bank which is on the appointed date carrying on banking
business, shall subject to the provisions of section 9, be deemed to have been
authorised by the Central Bank, to act as an authorised dealer to deal in
foreign exchange.

(c)Every
licensed specialised bank, immediately upon such bank being issued a license to
carry on banking business under the Banking Act, may be authorised by the
Central Bank subject to the provisions of section 9, to deal in foreign
exchange for the purposes specified in such authorisation.

(d )Every
licensed specialised bank which is on the appointed date carrying on banking
business, shall subject to the provisions of section 9, be deemed to have been
authorised by the Central Bank to deal in foreign exchange for the purposes
specified in such authorisation.

(2) —

(a)The
Central Bank may permit, subject to the provisions of section 9, any person,
class or classes of persons (hereinafter referred to as a “restricted dealer”)
not being an authorised dealer, to deal in foreign exchange within Sri Lanka
for the purposes specified in the permit, subject to such terms and conditions
as may be imposed by the Central Bank in that behalf.

(b)Every
dealer in foreign exchange including money changers or any other person other
than licensed commercial banks or specialised banks, which are on the appointed
date permitted to deal in foreign exchange, shall subject to the provisions of
section 9, be deemed to have been permitted by the Central Bank, to act as a
restricted dealer to deal in foreign exchange for the purposes specified in
such authorisation.

(c)The
Central Bank may, subject to the provisions of section 9, grant special
permission, to any person not being an authorised dealer or restricted dealer,
to deal in foreign exchange within Sri Lanka for specific purposes as may be
prescribed by the Minister by an Order published in the Gazette
subject to such terms and conditions as may be specified in such Order.

(3) Save as otherwise provided in this Act, no person in or
resident in Sri Lanka shall deal in foreign exchange within or outside Sri
Lanka, by any act which involves the conversion of Sri Lanka Rupees or assets
within Sri Lanka to foreign exchange, otherwise than through an authorised
dealer, or to the extent specified in the permit, through a restricted dealer.

5. Foreign exchange or foreign assets held or owned by a
person in or resident in Sri Lanka.

Any person in, or resident in, Sri Lanka who—

(a)holds
foreign exchange in a bank account in Sri Lanka or outside Sri Lanka; or

(b)owns
any foreign asset,

may utilise such foreign exchange or foreign asset for making of
any payment for, or in respect of, any current or capital transaction of such
person, within or outside Sri Lanka. Any such payment made from foreign
exchange held by such person within Sri Lanka shall be made through an authorised
dealer, or to the extent specified in the permit, through a restricted dealer.

6. Current transaction.

(1) A person shall be entitled to deal in foreign exchange for a
current transaction of such person, through an authorised dealer or to the
extent specified in the permit, through a restricted dealer.

(2) An authorised dealer or a restricted dealer may deal in
foreign exchange for a current transaction as a principal or as an
intermediary.

(3) Prior to dealing in foreign currency for a current transaction
under subsection (1), an authorised dealer or a restricted dealer shall request
the person requiring foreign exchange for such transaction to provide such
information or produce such documents or make such declaration as is reasonably
necessary, in order to satisfy himself that the requirement is in relation to a
current transaction and is in conformity with any other laws regulating such
transactions.

(4) An authorised dealer or a restricted dealer shall refuse to
deal in foreign exchange for a current transaction under subsection (1) where
the request for information, documents or declaration in terms of subsection
(3) relating to such transaction is not complied with or where the dealer is
satisfied that the requirement is not for a current transaction or is not in
conformity with any other laws regulating such transactions.

(5) An authorised dealer or a restricted dealer refusing to deal
in foreign exchange for a current transaction under subsection (4) shall
communicate his decision in writing together with the reasons therefor, if
requested by the person requiring the foreign exchange subject to the
provisions of section 9 of the Financial Transactions Reporting Act.

(6) Any person aggrieved by the decision of an authorised dealer
or a restricted dealer under subsection (4) may, within fourteen days after
such decision is communicated to such person, appeal against such decision to
the Central Bank and the Central Bank shall, after giving such person and the
dealer a reasonable opportunity of being heard, affirm, vary or revoke such
decision.

7. Capital transaction.

(1) The Minister shall in consultation with the Monetary Board and
with the approval of the Cabinet of Ministers, authorise by regulations, the
class or classes of capital transactions in foreign exchange for the purpose of
this section.

(2) In making regulations under subsection (1), the Minister shall
have regard to—

(a)transactions
required to be regulated in conformity with any treaty or agreement relating to
international financial transactions to which the Government of Sri Lanka
is a signatory;

(b)the
impact of such authorisation on the monetary policy of Sri Lanka and its
stabilisation.

(3) The regulations published under subsection (1) may specify the
limit up to which capital transactions may be authorised and the terms and
conditions subject to which foreign exchange may be dealt with for the class or
classes of capital transactions, so authorised.

(4) Without prejudice to the provisions of section 5, a person
shall be entitled to deal in foreign exchange in respect of a capital
transaction of such person, through an authorised dealer or to the extent
specified in the permit, through a restricted dealer, being capital
transactions of a class or classes, which is or are authorised by regulations
made under subsection (1).

(5) An authorised dealer or a restricted dealer may deal in
foreign exchange for a capital transaction as a principle or an intermediary,
being a transaction authorised by regulations made under subsection (1).

(6) Prior to dealing in foreign exchange in respect of a capital
transaction under this section, the authorised dealer or the restricted dealer
shall request the person requiring foreign exchange for such transaction, to
provide such information or produce such documents or make such declaration as
is reasonably necessary in order to satisfy himself that the requirement is in
relation to a capital transaction authorised under subsection (1) and is in
conformity with any other laws regulating such transactions.

(7) An authorised dealer or a restricted dealer shall refuse to
deal in foreign exchange for a capital transaction under this section where a
request for information, documents or a declaration is not complied with or
where the dealer is satisfied that the requirement is not for a capital
transaction authorised under subsection (1) or is not in conformity with other
laws regulating such transaction.

(8) An authorised dealer or a restricted dealer refusing to deal
in foreign exchange in respect of a capital transaction under this section
shall communicate his decision in writing together with the reasons therefor,
if requested by the person requiring the foreign exchange subject to the
provisions of section 9 of the Financial Transactions Reporting Act.

(9) Any person aggrieved by the decision of an authorised dealer
or a restricted dealer under subsection (7), may within fourteen days after
such decision is communicated to such person, appeal against such decision to
the Central Bank, and the Central Bank shall, after giving such person and the
dealer a reasonable opportunity of being heard, affirm, vary or revoke such
decision.

(10) An authorised dealer or a restricted dealer shall not deal in
foreign exchange for a capital transaction that is not authorised by
regulations made under subsection (1) unless the Monetary Board taking into
consideration the existence of any exceptional circumstances has granted
approval for such capital transaction in accordance with such directions as may
be issued by the Minister in conformity with the approvals made under
subsection (1).

8. Regulation of certain transactions.

(1) A person in, or resident in, Sri Lanka shall—

(a)export
from Sri Lanka or import into Sri Lanka, any foreign currency or Sri Lanka
currency;

(b)hold
foreign exchange in his possession or in a bank account in Sri Lanka,

only for such purpose, up to such limits and subject to such
terms and conditions, as may be prescribed by the Minister by an Order
published in the Gazette.

(2) A person in, or resident in, Sri Lanka shall acquire a foreign
asset from foreign exchange derived from the conversion of Sri Lanka currency
or the disposal or conversion of an asset within Sri Lanka or provision of any
service in or from Sri Lanka only for such purposes, up to such limits and
subject to such terms and conditions as may be prescribed by the Minister by
regulations made in that behalf.

(3) Notwithstanding anything to the contrary in the provisions of
any other written law, any Sri Lankan citizen resident in Sri Lanka who remits
to Sri Lanka any foreign exchange which have not been declared to the
Commissioner General of Inland Revenue or the Head of the Department of Foreign
Exchange before the appointed date and which are not the property in respect of
which proceedings are pending in a court of law or an order has been made by a
court of law under the Prevention of Money Laundering Act, Convention on the
Suppression of Terrorist Financing Act, or the Bribery Act shall be liable to
pay only a remittance fee of one per centum to the
Commissioner General of Inland Revenue and shall not be subject to the payment
of any other fee, tax, surcharge, levy or penalty:

Provided that any such person who remits to Sri Lanka foreign
exchange not exceeding the value of one million United States dollars held
outside Sri Lanka shall not be liable to pay the remittance fee or any other
tax, surcharge, levy or penalty and any amount remitted exceeding such value
shall be liable to pay the remittance fee specified in subsection (3):

Provided further that any such person who remits to
Sri Lanka an amount of foreign exchange exceeding the value of one million
United States dollars held outside Sri Lanka and invests in a development bond
issued by the Government of Sri Lanka shall not be liable to pay the remittance
fee or any other tax, surcharge, levy or penalty.

(4) Foreign Exchange held outside Sri Lanka and remitted to Sri
Lanka after the appointed date under subsection (3) may be held in a
foreign currency account or may be converted into Sri Lanka rupees.

(5) The property referred to in subsection (3) shall not be deemed
to be the property obtained by the commission of an offence under the
Prevention of Money Laundering Act, even if such foreign exchange had been held
outside Sri Lanka without the permission of the Central Bank.

(6) There shall be no restriction on the repatriation of funds out
of Sri Lanka remitted to Sri Lanka by any person in terms of subsection (3) of
section 8.

9. Guidelines and directions.

(1) The Central Bank may from time to time, subject to informing
the Minister issue guidelines and directions to authorised dealers and
restricted dealers engaging in current transactions.

(2) The Central Bank may from time to time subject to the approval
of the Minister issue guidelines and directions to authorised dealers and
restricted dealers engaging in capital transactions.

(3) The Central Bank may from time to time subject to the approval
of the Minister issue guidelines and directions to authorised dealers and
restricted dealers engaging in transactions other than those referred to in
subsections (1) and (2) relating to foreign exchange.

(4) The Central Bank may from time to time subject to the approval
of the Minister issue guidelines and directions to any person, class or classes
of persons not being an authorised dealer or restricted dealer, permitted to
deal in foreign exchange within Sri Lanka under paragraph (c)
of subsection (2) of section 4.

(5) The Central Bank may for statistical and monitoring purposes,
request an authorised dealer or a restricted dealer to furnish within such time
as may be specified in such request, such information or returns in such form
and manner in relation to any foreign exchange transaction engaged in by such
dealer for a period of six years immediately prior to the date on which such
request is communicated to such dealer.

(1) The Central Bank may, at any time, cause an investigation to
be made, of foreign exchange transactions or foreign assets of any authorised
dealer or a restricted dealer or any other person, class or classes of persons
as the case may be, by an officer of the Department of Foreign Exchange
authorised in writing by the Central Bank (hereinafter referred to as an
“authorised person”) in that behalf.

(2) It shall be the duty of every authorised dealer or a
restricted dealer or any other person, class or classes of persons—

(a)to
permit an authorised person entry into any premises for the purposes of such
investigation;

(b)to
produce any books or other documents as may be required for the investigation
by such authorised person;

(c)to
permit such authorised person to retain for such time as may be necessary such
books and other documents or to take copies or extracts;

(d)to
appear before the authorised person when required to do so by such authorised
person;

(e)to
furnish such statement or information in relation to the investigation within
such time and in such manner as the said authorised person may require; or

(f )not
to furnish information under this section, which to the knowledge of such
dealer is false.

(3) Where an authorised person retains any book or document under
subsection (2) the authorised person shall furnish to the person from whose
custody or control such book or document was taken for detention, a copy of
such book or document certified by such authorised person if a request for a
copy is made by the person from whose custody or control such book or document
was taken or the authorised person may without retaining original books or
documents require the person to furnish true copies of such books or documents.

(4) An authorised dealer or a restricted dealer or other person
required to appear before the authorised person may be examined orally and any
statement made by such dealer or person shall be reduced to writing and shall
be signed by the dealer or person making the same.

(5) For purposes of an investigation under subsection (1), the
Central Bank or the authorised person may if the circumstances warrant, obtain
the assistance of a police officer to prevent a breach of the peace, in the
exercise of that right.

(6) Where the Central Bank apprehends any resistance in the course
of an investigation under subsection (1), the Central Bank may, on application
made to a Magistrate’s Court by a person authorised in that behalf by the
Monetary Board, within whose jurisdiction such investigation is made, obtain an
Order directing the authorised dealer or the restricted dealer or other person
as the case may be whose foreign exchange transaction or foreign assets is or
are being, or is or are to be, investigated, to appear before the authorised
person or to produce such books or documents in the custody or control of such
dealer or person as the Central Bank or the authorised person making the
investigation may reasonably require for such investigation.

(7) An application made under subsection (6) by a person
authorised in that behalf by the Monetary Board shall contain—

(a)the
name and address of the authorised dealer or a restricted dealer or other
person as the case may be whose foreign exchange transaction is being or is to
be investigated;

(b)the
address of the premises in which the investigation is to be made;

(c)the
name of the authorised person making the investigation; and

(d)a
prayer for an Order—

(i)for the appearance of
such dealer or person before the authorised person;

(ii)for the production of
the books and documents to the Central Bank or the authorised person;

(iii)to refrain from
obstructing the authorised person making an investigation under this section.

(8) —

(a)Court
may, after considering an application made under subsections (6) and (7) make
an Order prayed for under paragraph (d) of subsection
(7) and such dealer or person shall comply with the Order forthwith.

(b)Any
dealer or person who fails to comply with an Order of the court under paragraph
(a) commits an offence and shall, on conviction be
liable to a fine not exceeding rupees five hundred thousand.

(c)Where
the offence under paragraph (b) is a continuing
offence, such dealer or person shall be liable to an additional fine of rupees
hundred thousand for each day during which such offence continued.

11. Failure to comply with a provision of the Act or any
Regulation, Order, Direction, Guideline & etc. made or issued thereunder.

(1) Where the Central Bank is satisfied that an authorised dealer
or restricted dealer—

(a)deals
in foreign exchange in any current transaction or capital transaction contrary
to the provisions of this Act;

(b)deals
in foreign exchange in relation to foreign assets contrary to the provisions of
this Act;

(c)fails
to comply with any guideline or direction issued under subsections (1), (2) and
(3) of section 9 or any requirement under subsection (4) of section 9; or

(d)violates
any provision of this Act or any regulation or Order made thereunder,

the Central Bank may, upon the Minister being informed, issue a
notice directing any such authorised dealer or restricted dealer to comply with
the provisions of this Act or any regulation, Order, guideline or direction
issued or made thereunder, within the period specified therein.

(2) Where any authorised dealer or restricted dealer fails to act
in accordance with the notice issued under subsection (1), the Central Bank
may, temporarily suspend the authorisation granted under subsection (1) of
section 4 or paragraph (b) of subsection (2) of
section 4 or the permit granted under paragraph (a)
of subsection (2) of section 4 to deal in foreign exchange.

(3) The Central Bank may, where there is a temporary suspension
under subsection (2), after an inquiry, giving the authorised dealer or
restricted dealer a reasonable opportunity of being heard and with the approval
of the Monetary Board, revoke the authorisation or permit granted under section
4.

(4) The Central Bank may in the circumstances referred to in
subsection (1), without proceeding to revoke the authorisation or the permit
under subsection (3), after giving a reasonable opportunity of being heard and
where it deems it appropriate taking into consideration all the relevant
circumstances—

(a)require
an authorised dealer or restricted dealer who engages in any dealing in
relation to foreign assets contrary to the provisions of this Act as referred
to in paragraph (b) of subsection (1), to pay to the
Central Bank within such time as may be specified in such requirement an amount
not exceeding the amount or value of such foreign asset or any part thereof in
foreign exchange or Sri Lanka currency together with such expenses incurred by
the Central Bank for the detection and investigation of such transaction; or

(b)impose
a limitation on such authorised dealer or restricted dealer who has directly or
indirectly been a party to the unauthorised transaction, from dealing in or
engaging in current or capital transactions in relation to foreign exchange as
the case may be, for a period not exceeding twelve months.

(5) Where any other person, class or classes of persons, not being
an authorised dealer or restricted dealer acts in violation of the provisions
of paragraphs (a), (b), (c) or (d) of subsection (1), the
Central Bank may, upon the Minister being informed, after giving such person a
reasonable opportunity of being heard, require such person in writing, to pay
as a penalty a sum not exceeding rupees one million or to pay a penalty of an
amount not exceeding the amount or value of such current transaction or capital
transaction or value of such foreign asset or any part thereof in foreign
exchange or Sri Lanka currency together with such expenses incurred by the
Central Bank for the detection and investigation of such transaction.

(6) Where the Central Bank revokes an authorisation or permit under
subsection (3) or requires to pay the sum determined under paragraph (a) of subsection (4) or imposes a limitation under
paragraph (b) of subsection (4), the Central Bank
shall communicate its decision or determination in writing together with its
reasons therefor to such authorised dealer or restricted dealer.

(7) —

(a)Where
any authorised dealer or restricted dealer—

(i)aggrieved by a
revocation of the authorisation or permit under subsection (3);

(ii)aggrieved by the
requirement to pay the sum determined under paragraph (a)
of subsection (4); or

(iii)aggrieved by any
limitation imposed under paragraph (b) of subsection
(4),

as the case may be, he may within thirty days after such decision
or determination is communicated to such dealer, appeal against such revocation
or determination to the Board of Inquiry which shall determine such appeal in
accordance with the procedure set out in section 13.

(b)Where
any person not being an authorised dealer or a restricted dealer, aggrieved by
a penalty imposed under subsection (5), he may within thirty days after the
requirement to pay such penalty is communicated to such person, appeal against
such requirement to pay such penalty to the Board of Inquiry which shall
determine such appeal in accordance with the procedure set out in section 13.

(8) Subject to any Order made on an appeal under subsection (7),
the revocation of the authorisation or the permit under subsection (3) or any
limitation imposed under subsection (4) shall, notwithstanding such appeal,
take effect from the date the Order of revocation or limitation is made or
imposed on the authorised dealer or restricted dealer, as the case may be.

(9) Any sum paid to the Central Bank under paragraph (a) of subsection (4) or any penalty paid under subsection
(5) shall be credited to the Consolidated Fund.

12. Investigations and Inquiries to be concluded within six
months.

Every investigation and inquiry under section 11 shall be
concluded within a period of six months from the date of commencement of such
investigation or inquiry unless an extension of time is obtained with the
approval of the Minister.

13. Board of Inquiry.

(1) The Minister shall appoint a Board of Inquiry to inquire into
appeals made under paragraphs (a) and (b) of subsection (7) of section 11.

(2) The Board of Inquiry appointed under subsection (1) shall
consist of the following persons appointed by the Minister—

(a)a
retired judge of the Supreme Court or of the Court of Appeal who shall be the
Chairman of the Board; and

(b)two
persons who are conversant in matters relating to international financial or
exchange transactions and have had experience at a senior managerial level in
the public or private sector and are of good standing and repute.

(3) Every member of the Board of Inquiry shall, unless he vacates
office earlier by death, resignation or removal, hold office for a term of
three years from the date of his appointment and unless he has been removed
from office, be eligible for re-appointment.

(4) A member of the Board of Inquiry shall be remunerated in such
manner and at such rates as may be determined by the Minister.

(5) A person shall be disqualified from being appointed or
continuing as a member of the Board of Inquiry if he—

(a)if
he is, or becomes a member of Parliament or any Provincial Council or any local
authority; or

(b)if
he is not, or ceases to be a citizen of Sri Lanka; or

(c)if
he is under any law in force in Sri Lanka or in any other country found or
declared to suffer from unsoundness of mind; or

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